Good afternoon. Dan Brennan from the TD Cowen Tools and Diagnostics team here, lead analyst, and really glad to be here on the second day of the conference. With me on stage is the senior management team of GeneDx. We have Katherine Stueland to my immediate left, my right, excuse me, CEO, and Kevin Feeley to her right, who's Chief Financial Officer. Welcome.
Thank you so much for having us.
For sure. Thanks for being here. You know, terrific 2024 by the company, really explosive growth, yet we're still standing at maybe 10% or so penetration of pediatric neurologists for your targeted indication. So a really large market ahead. Maybe just to kick it off, just set the table on maybe the key initiatives in the coming year, you know, after a really blockbuster 2024, kind of, you know, how do you follow on that? And, you know, how do you move penetration up from where we are today to something meaningfully higher?
Certainly. Well, I think it's helpful to think about the fact that GeneDx, who provides exome sequencing, genome sequencing, we're diagnosing children with rare diseases today, aiming to diagnose any genetic diseases early as possible. We're in a really rare position where our testing provides better clinical decision making so we can improve clinical outcomes and clinical care for children with rare diseases, and we're actually also providing a really important service to the health care system. There's about $1 trillion of an economic burden to the U.S. health care system as it pertains to rare disease. The underutilizing of testing of our services contributes to that, so being able to actually utilize our services will help the health care system save money, so we're in a very unique position where we're just getting started with introducing our services beyond the core genetics expert segment into the pediatric neurologists.
As you said, we're only about 13% penetrated there by way of patients. And so our commercial engine is just getting started in terms of being able to have an impact in the outpatient setting. To layer in growth this year, though, the NICU setting and being able to provide rapid whole genome sequencing now as soon as 48 hours in that setting made possible by our integrations with Epic Aura really changes the game in terms of us being able to provide meaningful growth to a broader number of families.
Terrific. So Kevin, you've given us some really helpful yardsticks in the past about like some key anchors in the model, maybe about how things could move forward. You talked about exome mix increasing maybe 2%- 3% a year. You talked about the business can reach cash flow break even at 40% exome mix. Obviously, we're kind of, you know, really good cash flow dynamics in 2024. Maybe just some fresh perspectives on those metrics or maybe some other anchors that investors should think about as they try to, you know, forecast out the opportunity for GeneDx.
Yeah, thanks. So we guided to full year 2025 revenues between $350 million-$360 million, underpinning that 30% or higher growth in terms of exome genome volume and revenues. We at the same time will be throughout the year introducing new indications and new use points for exome and genome that will fuel a high level of revenue growth. But we want to do so in a responsible way.
And so we'll be targeting areas where we think we'll be able to drive high reimbursement, get paid fairly for our services, ultimately expecting to keep the business profitable. There are certain areas in particular that we think could accelerate the adoption and growth curve for exome and genome. We have our eye on that, but want to do so with a commitment to keep the company in the black in terms of profitable in each quarter of the year and for the full year of 2025.
So I wanted to ask a high level question about the kind of competitive moat as maybe others look to enter, you know, given your performance. But maybe, Kevin, since you brought up the guide, maybe you can unpack it a little bit more just in terms of, you know, any penetration metrics or other factors that could help us think through kind of, you know, what underpins that, you know, kind of volume and revenue growth for 2025. Do you want to break volume and price and any other factors?
Yeah, the way first I would look at cadence. The second half of the year will be stronger than the first overall. If you look at seasonality in the business, Q4 is typically seasonally strongest, Q1 seasonally weakest just due to timing of patients getting into physicians' offices at the end of the year before copays, deductibles reset on them. I think what I want to see is strong growth coming out of the NICU. That's starting almost a growth curve at zero and ramping in the third quarter into the fourth. We just went live about 10 days ago with a new EMR capability. We launched Epic Aura. That's on the heels of improvements in our genome product. We launched a buccal swab for a baby in the NICU. On the whole genome product, we announced a two-day ultra-rapid turnaround time in the NICU just last week.
The culmination of all of that will drive the NICU business. That's really a second half of the year growth story for us, and so throughout the year, we'll be keeping an eye on overall growth within the NICU, and then in terms of our overriding guidance philosophy, it tends to be line of sight in all things, including reimbursement levels, continually excited by our team's ability to drive down denial rate. That's led to a pretty steady increase in average reimbursement rate throughout 2024. I expect that to continue from a guidance perspective, tend to take a conservative view on waiting to see data compile to be able to rely on those higher rates, but absolutely think the team can continually drive down denials and improve average reimbursement rate throughout the year.
So how do we think about the competitive environment? You know, you've got 80% plus. I mean, you can tell us a number share of the market. You know, Baylor, Rady, are a few of the ones that come up. Tempus buying Ambry. You know, I'm sure many people in the sector have seen the success you've had in 2023 and 2024, and there might be a bigger spotlight. So just walk through what you expect from a competitive dynamic and how do you defend against that?
Absolutely. You know, I think to your point, we are the leader in exome and genome sequencing. 80% of that market has come through us, and competition is not new to us. There have been exomes on the market. There are genomes on the market. But I think it's important to note that there's a reason that eight out of ten genetics experts rely on us, and it's because of the accuracy of the information that we're providing. So underpinning our every single test result is a data asset that is comprised of 750,000 clinical exomes and genomes, all of which have been enriched for rare disease. 60% of the time we're running mom and dad, so we have comparator samples in that as well. And we also started investing ahead of state-by-state Medicaid coverage.
So we happen to have a data asset that is very reflective of the U.S. population. It's a diverse data asset. So the underpinning of the genotypic side of that data asset is a very unique and bespoke set of data that we've been able to amass over the course of about a decade. It is complemented by more than six million phenotypic data points. So think about all of the information that we're able to gather through clinic notes and other information, EMR-related information as an order comes in.
And it's the totality of both of those data sets coming together that ensures that we have the most robust clinical context to be able to upgrade or downgrade a variant of unknown significance more rapidly than other labs. So we're able to get to a 90% confidence interval faster to be able to ensure that the diagnostic yield is higher. We have fewer variants of unknown significance.
And so that data asset is what sets us apart. As I said, there's other exomes and genomes on the market. We do see Baylor Genetics as a good competitor. We think all of these players are actually really important in terms of accelerating utilization in the marketplace. But competition is nothing new. What we have learned is that data asset really does set our tests apart. So if somebody tries a different exome or a genome, they typically come back to us. We also have built beyond the clinical excellence and the quality and accuracy, we've also built the scale. And so we're able to drive down our turnaround times, drive down our cost of goods. We're deploying AI, machine learning, and other automation technologies to be able to bring down the cost of goods.
So we can make sure that we are always in the leader position to be able to never get undercut on price as well. So we have all of the ingredients that we need to continue to keep ourselves in the leadership position, opening up new markets, continuing to grow and accelerate the adoption of exome and genome testing. And importantly, all of us together are trying to put an end to this diagnostic odyssey, which remains a five-year ordeal for these families. We can do it within 48 hours, within days, within weeks today. There's no reason that a family should have to go through that.
Okay. Just one quick one on the turnaround time. So, you know, Roche is planning to come to market in the next year or two, big diagnostics player. They're claiming here is fast turnaround time. How much is turnaround time the differentiator such that if they do have a clinical ready box in, let's say, 18 months, could that sway any of the hospitals to say, "Hey, we want to adopt this, let's tell them to do it"? Or the other factors are just too important in the grand scheme, your database, maybe billing, you know, whatever else it might be. Maybe just speak to that turnaround time issue and whether or not that's something we should think about.
We love better, faster, cheaper turnaround or better, faster, cheaper sequencers. And we think that if that is in our lab or if it's in a hospital lab, we can actually be the interpretation layer. So we think that that's actually a wonderful addition in terms of being able to ensure that there's broader utilization of this information. But our interpretation platform is one that we want to be able to provide as a service to any health system, any country outside the U.S.
So we see a world where centralized labs are going to continue to be the best and the fastest and the most affordable, not to mention the most accurate in terms of the central strategy. But as we see sequencing going to a decentralized approach, it's our interpretation platform where we can bring the 750,000 clinical exomes in that data asset. We can bring it in a decentralized way in the future to be able to layer that on to sequencers like Roche's.
Okay. I would just add that the differentiated analysis and interpretation platform and capability is agnostic to the sequencer manufacturer.
So maybe on the inpatient starting off there, can you just, you know, a very low percentage of babies I think are receiving genetic testing in the NICU today. So do you think that's more so from reimbursement? Is it patient? Is it doctor education? Just kind of walk through that aspect, A, and then B, Kevin, within your guidance for the year and Katherine, you know, I think you've talked about, you know, kind of the split between outpatient and inpatient where we are today, maybe 90/10 or just remind me the number. But like where do you expect that goes to by year end? I know you're only going to have the EMR capabilities in the second half, but how quickly can you see that start to run?
Yeah, the NICU, the inpatient opportunity once again is woefully underserved today. So fewer than 5% of babies in the NICU get a genetic test. And so our mission is to go in and make sure that particularly in the Level III and Level IV NICUs, we're able to make it as easy as possible for us to get a genetic diagnosis. A recent study just showed that about 60% of children, of babies in the NICU at level three, level four, would benefit from a whole genome sequencing. So what we learned was you need a few things in order to win in that market. One, you have to be where the baby is and where the clinician is, and that's right at the bedside.
And so the Epic Aura investment that we've made to be able to place our testing at that bedside opens up the NICU opportunity in a really meaningful way. It keeps us in their workflow versus them having to step out of their workflow into the hallway, logging into a separate laptop. So we're now embedded clearly in that workflow, starting with the University of North Carolina and expanding throughout the course of the year. You also need to have fast turnaround times. Our 48-hour ultra rapid gives us the ability to turn around our results quickly. And then you also need a cheek swab. So we put some product improvements into place to ensure that our team has everything that they need. They brought to us a pipeline of health systems and business that convinced us that it was the right thing to do.
And so now we get to bring the cost savings to these hospitals in addition to the better clinical care. So we're excited about our ability to take that number from fewer than 5% to be able to make sure that these families can have the information that they need as soon as possible.
Ultimately, we see in the U.S. the need for about 225,000 to 250,000 tests a year in the NICU. Just looking at Level 3 and Level 4 NICUs is then an assumption how often beds turn around and with about a 50% or so need to intervene with a rapid genome upon admittance to those NICUs. That's the case we're bringing to the market now. We've introduced a whole number of product enhancements this year. Dan, in terms of the guide, you're talking about, you know, a few thousand tests in the back half of the year, with 2026 being when we'd expect to reach sort of escape velocity. It's our intention to dominate that market, but we're putting into place the pieces now, including an expanded enterprise sales team to begin C-suite education with respect to not just the clinical benefit, but the health economic benefit.
That is a longer sales cycle. And so we want to be careful in terms of what we promise here in terms of 2025 impact. It will be an important growth driver in 2025, but we'll extend well beyond that with a long-term growth trajectory as we fill out that market of what's nearly a quarter million tests that need to be run to service these kids in the NICU.
Kind of that 250,000± , what Medicaid coverage in place for how many of those? How many states have that? What's the latest number?
There's 14 states that cover the use of rapid genome inpatient and 32 for exome and genome outpatient. It's taken us only a few years to get there. I've been with the company eight years at GeneDx. When I started, there were zero states covering these tests. So tremendous progress has been made, all hard-fought wins at the individual state level. But there's still a long way to go to move from 32 to 50+ Medicaid programs over time. We'd expect to see a natural progression of a few states a year, many states picking up biomarker bills and moving through the process. But it is a long and arduous process, but one that ultimately we think can not just fill an unmet medical need, but save the healthcare system, state and federal government a lot of dollars by moving into a genomics-first approach.
In terms of the commercial, that's largely all. Medicaid covers it, what the hospital would just bill directly as opposed to be part of the DRG. Just walk through like the billing on the inpatient and, you know, are all 250,000 of those, you know, infants going to be kind of targetable given where coverage is today or do you need something to change?
Yeah, in the NICU in particular, inpatient predominantly institutional sale. So the hospital being reimbursed via the DRG and then using those DRG dollars to make decisions on where they want to allocate those resources and paying us directly for a test. So 100% collectible with the insurance risk they're sitting with the hospital in order to use those DRG dollars most efficiently.
Do you find there's a tremendous pull from hospitals to want to do this now that you've got Epic and you have the cheek swab? Or is there still a lot of pushback, just maybe the utility they don't see it or the cost to do it isn't kind of worth it from their perspective?
The interest is there and the logic is there. The data are there to prove it. So it really became a workflow side of things and we've solved for that. So there's strong demand and we're excited to be able to pull that through this year.
Then kind of moving maybe to the outpatient, I think you had an announcement today on cerebral palsy. Maybe just speak to kind of where we are in the outpatient penetration. You know, Kevin and I, you've worked with us trying to help size, you know, this market. We can look at, you know, single gene test as a kind of switchover. You can look at maybe incidence, but maybe start with the cerebral palsy announcement today and kind of what that means and then zoom out to like the overall opportunity in outpatient.
So as we've looked at growth for the year, so we've gotten to more than 30% volume and revenue growth. What we want to be able to do is continue to invest in market development. We know that testing is underutilized across any number of conditions. There's 7,000 rare diseases in totality. Last year, we focused on epilepsy, autism, developmental delay. What we're starting to layer on are additional patient populations where there is a path to reimbursement, where our exome has been shown through some of the research that we've done to be able to have a high diagnostic yield. Cerebral palsy is one of those conditions where we believe that there's really good merits in terms of moving from multi-gene panels to an exome in that outpatient setting. There's more than 30% diagnostic yield for patients in that population using exome testing.
The tried and true reality of genetic testing, the more that you test, the more that you find that there's a higher prevalence rate. And so we want to continue to build those markets. CP is one that we announced today. As I said, there's a 30% diagnostic yield from our own research that we've published. We'll continue to layer on additional indications. Think about hearing loss. What is wonderful about the overall approach that we've been able to take, there's not a requirement to add any content to our core technology. It is all there embedded in our exome and genome. It's more about making sure that we're turning our commercial team's attention to that, that we're educating the market. It's the same call point. But I think what's really important, we could turn on volume today and grow like gangbusters.
What we're trying to really make sure that we can do is both grow and open up access to be able to diagnose these kids as rapidly as possible, particularly given the medical management that can be impacted by earlier diagnosis. But we want to make sure that we're balancing that with being able to be paid for our services. So we're being very deliberate about the indications that we're going after to ensure that there's a path to reimbursement there. But all the content is already there. It's just turning our attention to that, driving utilization, and then being able to build the case with payers and ensuring that we can pull that through on the reimbursement side of things.
Like I know you talked about this on the call a little bit, but between hearing loss and cerebral palsy, do you expect a meaningful volume bump this year?
That's probably worth a few thousand tests in the second half of the year. I think we want to learn as we enter into some of these new markets and go through education just how quickly we should run, again, balancing what is demand out there for a better mousetrap to replace individual gene tests and smaller gene panels with exome and genome, with ensuring that we have clarity of a pathway to being reimbursed. So want to see some of that adjudication experience come back first from payers and then decide how quickly we run after that.
And between autism, epilepsy, and developmental delay, are any one of those, again, they're all tested, but is any one of those for some reason more of an opportunity to see greater penetration? It's the same exome being run. I'm just wondering between your three main kind of indications.
They are all important, and I think that part of the wisdom of this is making sure that we are not becoming an epilepsy company or an autism company or even for that matter, a pediatric company. This is about a future where we're diagnosing any genetic disease as early as possible. Part of what drives the decision-making in terms of our market expansion is in part reimbursement, of course, patient populations, but there's also the biopharma side of things and being able to connect patients with what clinical trials may be available to them, FDA-approved therapies, other sorts of therapeutic interventions, especially as we start thinking about using this information more proactively, so think about newborn screening. Clinically actionable conditions are incredibly important for us as we think about prioritization.
When you think about the outpatient volume growth, like how did that flow in 2024? And you're not going to probably give me a distinct number, but how do you think about like what's kind of implied in the growth for 2025? And you know, what are kind of the, you know, the puts and takes on if you were to do better or worse than that?
Yeah, I mean, so the aggregate of 30% or higher would pull in sort of continually farming that outpatient opportunity and that pediatric neurologist call point. I don't want to completely discount even within the core of expert geneticists. I think we're fully saturated. There's not a, I believe, expert geneticist in the United States or around the globe who's never heard of GeneDx, but there's still conversion opportunities from legacy gene tests and gene panels. In the fourth quarter, 38% of all tests run at GeneDx were exome and genome. Do we believe one day we get that number to 100%? Absolutely. So there is still going to be a lot of ground to cover in that core of expert geneticists in continually farming the pediatric neurologist space, then eventually layering on the NICU and some of these other growth layers.
I think if you look at the outpatient population in particular, across pediatric neurology, we're about 13% penetrated. There's no reason I think we can't reproduce the same growth rate we saw from 2023 to 2024 into 2025. From a guidance perspective, we tend to err on the side of underpromise, overdeliver as an overarching philosophy. But I think we've never been more optimistic that we've got the team properly calibrated, resourced. We learned a lot of lessons, made a lot of mistakes over the past two years with respect to go-to-market approaches, and all of that is now entering into the team's tactical plans for 2025 and beyond.
Great. So maybe you talk about kind of pricing. You've done a terrific job. You've talked about it a few times on this call already. Kind of, I think you've baked in, I think like flattest realized price from Q4. So maybe just elaborate a little bit on what's implied and then just speak to prior period collections that have been a consistent good guy for the company. Do those continue? And just give us a sense on commercial too. You know, you had that one customer in Q4 that was a notable collection. You know, just any color on how we think about the commercial opportunities we move forward for better pricing.
Yeah, I mean, the guide assumes a flat average reimbursement rate, therefore no further improvements in denials. Do we think we can beat that? Yes, we think we can beat that. There's an inherent complexity in the insurance adjudication process. So I'd like to see improvements in the rate materialize in data before we promise them and signal them in the future. We're still at a position where roughly 50% of all tests are being paid and therefore 50% being denied. We certainly believe that there's room to improve on that. There's a team of people well skilled within the company who wake up every day trying to do just that. From a guidance perspective, I want to lean towards line of sight. One area of maybe major conservatism, but I think appropriately so, is those 32 states that cover the test and 14 that cover it inpatient.
Do I think more states will come online with an evolution of policy to cover exome and genome in 2025 and beyond? Yes. But from a guidance perspective, I tend to leave those as uplift. We supply a lot of data. We perform a lot of advocacy, but tend to layer those onto projections once those states pick up policy coverage. So it's just one example of overall conservatism that we'd like to anchor to.
Great. So I have a minute. I'm going to try to sneak in two questions. One is just on utility. So diagnostic yield, for sure, you find it faster. And what % of those cases do you actually have an impact on care? And then related to that, like how does that influence or not commercial coverage? You talked about, you know, this 50% payment rates going up, but the commercial insurers mostly cover the test and you have contracts and it's more just the ability to get them on the right paper. Just maybe speak to those two factors.
Yeah, clinical utility and actionability is top of mind for payers, for sure. So the diagnostic yields that we're finding, 40%± on the genome side, 30%± on the exome side. The conditions that we are testing for, generally there is a clinical care plan that follows. So we're focused in the right areas that ensure that payers see that clinical actionability.
And then, Kev, just wrapping up, just in terms of commercial coverage, just remind us, like is the opportunity more to get more commercial insurers to say, "We believe in this and we're going to cover it," or is it they already cover it and then just making sure you're getting paid?
I mean, we're contracted in a network with over 80% of the commercial lives in the U.S. It's more so incumbent on us to make sure that across a payer universe of 1,000 payers, we're matching individual procedural administrative requirements one by one, payer by payer. That has paid dividends and we'll continue to do that work.
So, Katherine, just wrapping up, next few years, kind of you have a lot of interesting growth initiatives and opportunities ahead, and the stock's done well, but either what are people missing or what kind of excites you maybe that people aren't maybe thinking about enough?
I think that the open landscape of patients that we have the opportunity to help, there's no reason that these families should be going on a five-year diagnostic odyssey. It's a game changer to be able to cut that off. That's our goal. And we think that the future of being able to do this across children, across adults, and getting into a place of using it preventively is exactly where we're in the position to be able to drive towards.
Great. Well, thank you both for being here. Thanks, everyone, for participating in the audience. Thank you.